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The Institutional Risk Analyst

© 2003-2024 | Whalen Global Advisors LLC  All Rights Reserved in All Media |  ISSN 2692-1812 

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RITM Goes Multi Asset; TCBI Shrinks Assets, Grows Returns

August 4, 2023 | Premium Service | Several readers asked about the results for Rithm Capital (RITM), one of the more aggressive hybrid REITs in the world of mortgage finance, both residential and commercial. CEO Mike Nierenberg just delivered a record quarter, surprising a lot of analysts. RITM's NewRez taxable appendage is the fourth largest mortgage servicer with over half a billion in loans serviced

RITM’s upside earnings surprise illustrates how difficult it is for even sophisticated investors and analysts to parse the public disclosure of earnings from mortgage companies. Even as RITM works to redefine its business purpose as a manager of alternative assets, it is preparing to spin-off virtually its entire residential mortgage business. But will that interesting possibility ever be a reality? See below.

“Rithm had one of its best quarters ever,” said Nierenberg with considerable pride. “We had near record earnings, grew book value, acquired $1.4 billion of consumer loans and grew our SFR business with the acquisition of 371 units... With the introduction of new capital rules being instituted on banks and the highest level of rates seen in 20+ years, the investing environment has not been this good in years.”

Nierenberg is absolutely right that the Fed has turned over the proverbial card table, to use a Bear, Stearns metaphor. The range of assets being abandoned by banks and other investors as interest rates rise is impressive and mounting. The change in the RITM business is dramatic as illustrated by the table below from the Q2 2023 earnings release.

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